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UNIVERSAL CONSULTING INDIA PVT LTD
Shivsagar Estate D, Dr Annie Besant Road
Worli, Mumbai 400018, India
T : +91 22 66222100
www.universalconsulting.com
Business Landscape of India
11 April 2011
22011 Universal Consulting India Pvt Ltd© Confidential
Agenda
Geography & History
Economic Outlook
Foreign Trade
Market Opportunities
India’s Edge
32011 Universal Consulting India Pvt Ltd© Confidential
Capital New Delhi
States 29
Main Metros Mumbai, Delhi, Chennai, Hyderabad, Bangalore, Kolkatta
Area 7th largest country in the world
Population ~ 1.2 billion
Time Zone GMT +5.5
Currency Indian Rupee (INR)
Institutional Framework & Rule of Law
Anglo-Saxon Style
Languages 180
Education 18 Principal Languages, Second largest English speaking country, English is the business language Strong University Network, Global recognition, Moderate fees, Excellent Cultural Exposure, Safe Environment
Religion: 80% Hindu, 14% Muslim,2.4% Christian, 2% Sikh, 0.7% Buddhist, 0.9% Other
Ethnic Group: Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3%
Major Festivals: Diwali, Id, Christmas, Holi
Source: www.mapsofindia.com
India
42011 Universal Consulting India Pvt Ltd© Confidential
The world’s 2nd most populous country with 1.21 billion people (2011), expected to reach 1.6 billion in 2050 (#1)
0.3
1.2
1.6
0.0
0.6
1.2
1.8
1950 2010 2050
Population (billion)
Growth of Indian Population
Growth rate 2%
Growth rate 1.6%
Source: HSBC, 2011
52011 Universal Consulting India Pvt Ltd© Confidential
HSBC and Standard Chartered, January, 2011
62011 Universal Consulting India Pvt Ltd© Confidential
PWC 2009
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Historical Milestones…
Trade between India and
Mesopotamia2600 BC
1500 BC
1000 BC
563 BC
327-320 BC
300-500 AD
Aryans invade the Indus
Valley region
Rig Veda, the first Vedic
literature, is written
Gautama Buddha, the
founder of Buddhism, is born
Alexander the Great passes
through the Indus Valley
Gupta Era in India; India
expands
Hiuen-Tsiang visits India630 AD
712 AD
1288 AD
1498 AD
1526 AD
1600s AD
Arabs invade India, and
trade begins between the
two regions
Marco Polo visits India
First voyage of Vasco-da-
Gama to Goa. Restores
trading links; Dutch and
British follows
Mughal Empire unifies North
and South India; amalgam of
Persian and Indian culture
East India Company gets
monopoly over India Trade
Source: http://eawc.evansville.edu/; http://www.kamat.com/; www.businessweek.com
82011 Universal Consulting India Pvt Ltd© Confidential
Historical Milestones…
Textile industry collapses due to British embargo. India becomes British's agricultural colony
1700s AD
Mid 1800s AD
1869 AD
Early 1900 AD
1940s AD
1947 AD
British introduce irrigation canal, railroad, modern banking in India. The export trade rises
Suez canal lays the basis for the integration of the Indian economy into world market
Constitutional reforms encourage industrialization. Tata Co. begins producing steel, power, textile
Indian industry grows rapidly during WWII
India gets independence. Public sector dominates manufacturing. Banks are nationalized
Foreign reserves were among the world’s largest, at $2.1 billion. Civilian space research begins in India
1950s AD
1982 AD
1984 AD
1991-97 AD
2000-06 AD
2010 AD
Infosys technologies develops software for global corporations
Rajiv Gandhi, prime minister from 1984-89 encourages high tech development
Economic reforms begins in response to BOP crisis. Liberalization of trade policies
Software firms blossom. Auto, pharma, becomes major exports Outsourcing creates a service economy boom
Source: http://eawc.evansville.edu/; http://www.kamat.com/; www.businessweek.com
92011 Universal Consulting India Pvt Ltd© Confidential
Agenda
Geography & History
Economic Outlook
Foreign Trade
Market Opportunities
India’s Edge
102011 Universal Consulting India Pvt Ltd© Confidential
Macro indicators are the strongest they have ever been
Average Literacy
Rate
Labor Force
Inflation
FDI
Forex Reserves
GDP Growth
Real GDP
64.84%65.4%52.2%
509.3 million496 million364 million
5.3%4.6%10.3%
USD 9.5 billionUSD 8 billionUSD 0.36 billion
USD 191.9 billionUSD 151.6 billionUSD 1 billion
8.5%7.5%5.3%
USD 796.1 billionUSD 759 billionUSD 48 billion
2006-072005-061990-91
Source:www.indiainbusiness.nic.in
112011 Universal Consulting India Pvt Ltd© Confidential
India ranks 10th among the largest economies on real GDP
Real GDP 2006 (USD Billion)13,220
4,911
2,8582,512 2,341 2,154
1,780
1,089 1,081796 768.5 741.5 733 645 620
USA Japan Germany China UK France Italy Canada Spain India SouthKorea
Mexico Russia Australia Brazil
Source: CIA World Factbook 2007
122011 Universal Consulting India Pvt Ltd© Confidential
India crossed the trillion-dollar threshold as a result of the US dollar slipping below INR 41, recently
Trillionaires Club (GDP in $ trillion)
1.01
1.07
1.22
1.27
1.84
2.23
2.36
2.55
2.89
4.46
13.46
India
Brazil
Spain
Canada
Italy
France
UK
China
Germany
Japan
USA
According to the current exchange rate, INR 41 per dollar
Source: Times of India, 2007
132011 Universal Consulting India Pvt Ltd© Confidential
India ranks 10th among the largest economies on real GDP
GDP on a PPP basis 2006 (USD Trillion)12.98
10.00
4.22 4.04
2.58
1.90 1.87 1.73 1.72 1.62
USA China Japan India Germany UK France Italy Russia Brazil
Source: CIA World Factbook 2007
142011 Universal Consulting India Pvt Ltd© Confidential
India is expected to be the 2nd largest economy before 2050
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
India
China
Brazil
Russia
Flags in the chart represent the countries overtaken by BRIC in the given year
Source: India’s rising growth potential, Global Economics Paper 152: Goldman Sachs
152011 Universal Consulting India Pvt Ltd© Confidential
India’s potential growth rate is geared up at for an average of 8.4% till 2020
GDP Growth
Percentage Point Contribution to Growth
-3
0
3
6
9
1971-79 1980-89 1990-99 2000-05 2006-10E** 2011-20E
TFP Capital Accumulation Labour and human capital
** indicates Goldman Sachs projection
Source: India’s rising growth potential, Global Economics Paper 152: Goldman Sachs Economic Research
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India will be among top 3 contributing nations to global growth in next 15 years
Contribution to Global Growth between 2006-20 (in %)26.7%
15.9%
12.2%
2.4% 2.3% 2.3% 1.9% 1.9%
China USA India Brazil Russia Indonesia UK Germany
172011 Universal Consulting India Pvt Ltd© Confidential
India had the 5th largest forex reserve amongst developing economies in 2005
64
71
73
117
124
152
165
208
253
769
Brazil
Mexico
Malaysia
Singapore
Hong Kong
India
Russia
South Korea
Taiwan
China
Forex Reserves of the developing economies (2005-2006) (USD billion)
Source: www.economywatch.com, www.rbi.org.in
182011 Universal Consulting India Pvt Ltd© Confidential
India’s foreign exchange reserves topped $200 billion for the first time in 2006
Foreign Exchange Reserves (USD Billion)
5.8 9.2 9.819.2
25.2 21.626.5 29.3 32.4
38 42.3
54.2
75.4
113
142151.6
200
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: www.economywatch.com, www.rbi.org.in
192011 Universal Consulting India Pvt Ltd© Confidential
Net investment by FIIs in 2006 was the highest ever
FIIs registered with SEBI went up from 540 in 2004 to 920 by June 2006
Major drivers behind FII investments in India are
- Strong macro-economic fundamentals with good corporate results
- Low inflation, abolition of long-term capital gains tax, transparent regulatory system
FII Investments in India (USD billion)
-0.5
2.0
4.5
7.0
9.5
12.0
14.5
17.0
1998 1999 2000 2001 2002 2003 2004 2005 20060
10
20
30
40
50
60
70Net Investment Cumulative Net Investment
Source: SEBI
202011 Universal Consulting India Pvt Ltd© Confidential
India is the second most favored destination for FDI
India reaches its highest ranking ever in 2005 and remains second in 2006 also
45% of global investors are more upbeat on China and India compared to last year
FDI Drivers
Market size/market
potential
32%
Labour force skills
25%
Wages
17%
Opportunities in
Infrastructure
Development
13%
Government
incentives
13%
FDI Confidence Index 2005
Rank 2005 20041 China China
2 India United States
3 United States India
4 United Kingdom United Kingdom
5 Poland Germany
6 Russia France
7 Brazil Australia
8 Australia Hong Kong
9 Germany Italy
10 Hong Kong Japan
Source: AT Kearney
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India’s cultural & regulatory environment is favorable to investors
Which country is more attractive for the following FDI attributes?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Highly Educated Workforce
Management Talent
Rule of Law
Transparency
Cultural Barriers
Regulatory Environment
Availability of M&A Targets
Consumer Sophistication
Competitor Presence
Tax Regime
Political/ Social Stability
Quality of Life
Economic Reform
Financial/ Economic Stability
Infrastructure
Production/ Labor Cost
Government Incentives
Access to Export Markets
Market Growth Potential
Market Size
India China
Source: AT Kearney
222011 Universal Consulting India Pvt Ltd© Confidential
Total FDI Inflows were USD 10.6 billion in 2006-07
Country-wise FDI Inflows (1991-2007)
* Indicates from April 2006 – Jan 2007
FDI Inflows (USD million)
4029
6130
5035
4322
6051
7722
10592
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07*
Others
13%
France
2%
Switzerland
2%
South Korea
2%
Germany
4%
Singapore
4%
Japan
5% Netherlands
6%UK
9%
USA
13%
Mauritius
40%
Source: Outlook Business
232011 Universal Consulting India Pvt Ltd© Confidential
Electrical equipments are the largest recipient of FDI
Electrical equipment sector, including computer software and electronics, attracted USD 4.9 billion in FDI from Aug’91 to Jan’06
Services sector ranked second with USD 7.3 billion in April 2006 -Jan 2007
Sector wise FDI (2003-07)
Electrical Equipments
19%
Service Sector
17%
Telecommunications
9%
Transportation
Industry
8%
Fuel
6%
Chemicals
5%
Construction Activites
4%
Food processing industries3%
Cement and Gypsum
products
2%
Drugs and Pharma3%
Others
24%
Source: Outlook Business
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Major MNCs in India
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262011 Universal Consulting India Pvt Ltd© Confidential
Indian FDI abroad has increased 6 fold between 2000-05
India’s FDI outflow will soon exceed the inflows in 2007-2008 reports Indo Asian news service
Indian companies are rising in the global investment market
Major destinations for India's outbound investment are US, Russia, Mauritius, UK, and Sudan
India may soon join the `capital convertibility' club. This will accentuate the scope for outbound investment
Annual FDI Outflow (USD million)Indian FDI Abroad (USD Mn)
7571391 1819
1254
2489
5000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Source: RBI; IMA India 2005
272011 Universal Consulting India Pvt Ltd© Confidential
Indian companies paid more than $40 billion to buy foreign firms, in 2006
Noteworthy acquisitions
Indian Buyer Company Acquired Price (USD Billion)
Date
MITTAL STEEL World’s largest Steel maker in Europe but Inidan Owned
ARCELOR Europe’s top steel producer
33.5 Jun-06
TATA STEEL One of the world’s pioneering steel companies
CORUS one of the world’s largest producers of steel, headquartered
13.65 Oct-06
HINDALCO INDUSTRIES The Flagship company of the Aditya Birla Group
NOVELIS INC The Group’s principal activity is to manufacture and market
6.00 May-07
SUZLON ENERGY specializes in providing total solutions in Wind Power Generation
REPower Specializing in Honda small engine parts and upgrade kits for, liquid and air cooled
1.70 May-07
ESSAR India-based diversified corporation with interests in telecommunications, shipping, steel, construction, power and oil
CANADIAN ALGOMA STEEL An integrated primary steel producer
1.55 Jun-07
Source: TIME, Nov 27, 2006
282011 Universal Consulting India Pvt Ltd© Confidential
Agenda
Geography & History
Economic Outlook
Foreign Trade
Market Opportunities
India’s Edge
292011 Universal Consulting India Pvt Ltd© Confidential
Asia and Oceania remained the largest trading partner of India in 2006-07
Imports Exports
Europe
CIS & Baltic States
Asia & Oceania
America
Africa
11% 21%
7%5%
31% 24%
1%3%
50% 47%
Source: www.commerce.nic.in
302011 Universal Consulting India Pvt Ltd© Confidential
Indian exports are expected to reach USD 150 billion by 2010
Indian exports crossed USD 100 billion in 2005-06
8 million new jobs are expected to be created in next 5 years in exports
In the next 10 years Indian exports are expected to cross USD 300 billion mark
Growth in Indian Exports
0
20
40
60
80
100
120
140
160
2001-02 2002-03 2003-04 2004-05 2005-06 2009-10
USD Bn
0
5
10
15
20
25
30
Million
Exports (USD billion) Jobs Created (Million)
Source: www.commerce.nic.in
312011 Universal Consulting India Pvt Ltd© Confidential
USA was the major export destination with 17% share of total exports in 2005-06
Center of gravity of trade is shifting from Atlantic Ocean to the Indian Ocean
While exports to the United Kingdom grow by 30%, India’s trade with Singapore, China, and South Africa grew by 54, 35, and 48%
Share of top 5 Trade Destinations
Exports17.2%
8.2%
6.0% 5.7% 5.2%
USA UAE China Singapore UK
Imports7.54%
5.46%
4.58%4.09%
3.41%
China USA Switzerland Germany Australia
Source: www.commerce.nic.in
322011 Universal Consulting India Pvt Ltd© Confidential
India’s trade with China has increased at a CAGR of 55% in last 4 years
India has become the 11th largest trading partner of China
The next two-three years will felicitate greater interaction at the political level between the two
countries, having a major impact on trade, investment and cultural relationship between the two
countries
India’s Trade with China (USD billion)
CAGR: 55%
4.9
7.6
13.6
17.5
30.0
2002-03 2003-04 2004-05 2005-06 2009-10
Source: www.commerce.nic.in, Business India
332011 Universal Consulting India Pvt Ltd© Confidential
Petroleum and Metals exports registered the maximum growth in 2005-06
Growth in Export of Commodities
63.4% 62.6% 61.8%59.7%
47.0%
39.1%
35.1%33.5% 32.8%
PetroleumProducts
Non-ferrousMetals
TransportEquipments
Rice Iron ore Garments ofman made
fibres
Machinery &Instruments
Cottongarments &accessories
HandmadeCarpets
Source: www.commerce.nic.in
342011 Universal Consulting India Pvt Ltd© Confidential
Since 1991, India’s trade with its key Asian trade partners has grown by an average of nearly 14 times
Trade with South Korea has increased eleven-fold from USD 0.54 billion in 1991, to USD 6.1 billion in 2005
Trade increased from USD 777 mn in 1999-00 to USD 2.2 billion in 2005-06
Malaysia is among the top ten international investors in India
India is 12th largest trading partner & market
Indonesia is India's 3rd largest trading partner in ASEAN
Trade has increased to USD 17.4 billion in 2005 from USD 13.6 billion in 2004
FICCI estimates the bilateral trade to hit USD 30 billion by the end of this decade
South Korean is the fifth largest investor in India
Bilateral trade with India is estimated to reach USD 10 billion by 2008
Working with India to build a road linking India’s remote north eastern region with South East Asia
Signed a free trade agreement with India that will reduce tariff barriers between the two countries by 2007
Investments were around USD 450 million (2003) spread over diverse industries
Investments in India have grown by 60% annually for the last 10 years, amounting to USD 1.45 billion in 2003
Potential sectors for collaboration are retail, logistics, banking, & infrastructure
Estimated bilateral trade by the end of the current decade is USD 10 billion
China South Korea Thailand Malaysia Singapore Indonesia
India has emerged among the top 10 Asian trading partners for China
Bilateral trade amounting to USD 4.3 billion
Source: www.ibef.org; www.commerce.nic.in
352011 Universal Consulting India Pvt Ltd© Confidential
Agenda
Geography & History
Economic Outlook
Foreign Trade
Market Opportunities
India’s Edge
362011 Universal Consulting India Pvt Ltd© Confidential
Indian consumers remain the most confident in the future of their economy in 2006
Global Consumer Confidence Index (2006)
0 20 40 60 80 100 120 140
POR
JAP
TW
GRE
GER
HU
PH
TH
CZ
MEX
RUS
BEL
SA
US
POL
ARG
UAE
IRE
AUS
NDR
IND
Source: AC Nielsen Global Consumer Confidence Report 2006
372011 Universal Consulting India Pvt Ltd© Confidential
India is a nation of young consumers with high aspiration levels and greater spending power
Youth, with higher aspirations and “willingness to change” are early adopters of most modern products and concepts
The combination of youth and high consuming class population will lead to the emergence of a huge consumer base for various products and services
India’s consumer demand is currently three to five times faster than the overall economy
Population Trends in IndiaTrends in Purchasing power
110
158
33
92
20
53
5
23
1999 2003
Basic Level 1 Level 2 Luxury
36% 33% 30% 27%
58% 60% 63%64%
6% 7% 7% 9%
2001 2006 2011 2016
0-14 years 15-59 years 60 & above
Source: www.blonnet.com; www.ibef.org, Literature Review
382011 Universal Consulting India Pvt Ltd© Confidential
India's HNI segment is the 2nd fastest growing in the world
In 2006, India's HNI population, crossed 1 lakh, which
made it the second-fastest growing HNI segment in the
world, after Singapore, where the growth was 21%
Also 0.01% of India’s adult population are HNIs, which is
below the Asia-Pacific average of 0.1%, showing
significant potential for growth in the number of HNIs
There are several key wealth drivers that affected the
Indian HNWI population
- The industrial and service sectors grew by 9.7%
and 9.8%, respectively, in the first two quarters of
2005
- Robust earnings in the service sector fueled real
estate markets based on higher consumer demand
- India’s Bombay Sensex stock index rose more than
42.3% in 2005, with funds from foreign
institutional investors complementing
70
83
100
2004 2005 2006
Number of HNWI (In Thousands)
Source: Moneycontrol.com; Asia Pacific Wealth Report 2005;
392011 Universal Consulting India Pvt Ltd© Confidential
Sectoral/ structural picture
Services lead the way (55% GDP)
- Skilled, cost competitive, democracy dividend, telecoms
- Infrastructure less of constraint, little red tape, low taxes
Industry suffering from bottlenecks (28% GDP)
- Niche successes, but mass failure
- Infrastructure, labour laws, red tape, lack of quality culture
Agricultural weaknesses (17% GDP)
- Highly regulated, incorrect focus on productivity
- 60% of population derive their income from this
Very different structure from China
- Consumer-led vs. export led, relatively closed economy
- No mass manufacturing, services powerhouse
Source: Economic Intelligence Unit
402011 Universal Consulting India Pvt Ltd© Confidential
Major Sectors
2
3
4
5 Media & Entertainment
Telecom
1
Auto
Retail
Pharma
6 IT-ITeS
7 Real Estate
412011 Universal Consulting India Pvt Ltd© Confidential
India & China will provide significant retail growth opportunity in next 15 years
Much of the increase in global consumer spending over the next 15 years will occur in the leading emerging markets, and in China and India in particular
Unlike consumers elsewhere in Asia, Indians appear more prepared to spend than to save
Both the number of middle earners and their income levels are likely to rise rapidly in India
Share of World Consumer Spending (%)
USA 30.9%
EU 22.3%
Japan 6.6%
China 8.4%
India 3.1%
S Korea 2.2%
Russia 2.7%
Brazil 1.4%
Mexico 1.4%
France 3.4%
Germany 4.6%
Italy 2.6%
UK 4.4%
of which
2020
USA 32.5%
EU 27.2%
Japan 9.8%
China 3.3%
India 1.9%
S Korea 1.5%
Russia 1.3%
Brazil 1.6%
Mexico 1.9%
France 4.5%
Germany 6.2%
Italy 3.9%
UK 5.4%
of which
2005
Source: Economic Intelligence Unit
422011 Universal Consulting India Pvt Ltd© Confidential
The Indian Retail market is estimated at USD 350 billion in 2006-2007
India is currently the ninth largest retail market in the world
Driven by changing lifestyles, strong income growth and favorable demographic patterns, Indian retail is expected to grow 25 per cent annually
The US$ 6.1 billion Indian retail food industry, is growing at 9 per cent and dominates the shopping basket in India
22
2006 2010
CAGR: 40%
8
Organised Retail Industry (USD Billion)
1 2
Source: www.ibef.org
432011 Universal Consulting India Pvt Ltd© Confidential
Tier II cities will witness higher growth in the organised retail sector…
Mall development activity in smaller town is
picking up
Tier II cities will constitute ~25% of total sales
by 2010 from the current 15%
12.8 Million square feet of mall space coming
up in Tier II cities by 2007
CAGR 40%
CAGR 23%
1.20
6.256.80
18.75
2004 2010Tier II Cities Tier I Cities
Contribution in organized retail sales (USD Billion)
Source: Malls in India, Images Retail, www.imagesretail.com, UC Analysis
442011 Universal Consulting India Pvt Ltd© Confidential
FDI in retail will provide further impetus to retail growth
Currently, entry options for MNCs limited
- Cash and Carry wholesale trading being the sought after option
- On an average, Foreign Investment Promotion Board receives more than 12 applications every month from foreign companies for setting up wholly owned subsidaries for wholesale trading
With introduction of FDI in retail, foreign players entering India will increase
- USD 288 billion Wal-Mart Stores Inc., has announced their intention to enter India
Source: www.retailindia.typepad.com
452011 Universal Consulting India Pvt Ltd© Confidential
A USD 10 billion industry today, Indian Pharma will be USD 25 billion by 2010
India’s drug sector grown at 10% compared with 7% for the global industry
According to research by London-based researcher Global Insight, Indian drug makers will have a 33% share of
the global generics market by 2007, compared with 4% today
India has the highest number of USFDA approved plants
Indian Pharma Industry (USD billion)
5.15.9
6.87.9
9.110
13
25
2000 2001 2002 2003 2004 2005 2007E 2010E
Pharma Sector in India (USD billion)
Therapeutic Breakup of Indian Market
Anti-infective
17%
Gastrointestinal
11%
Cardiac
10%
Respiratory
10%Vitamins/minerals/nutri
ents
10%
Pain/analgesics
10%
Dermatologicals
5%
Gynaecology
5%
Neuro psychiatry
5%
Antidiabetics
4%
Opthologicals
2%
Others
11%
Therapeutic Breakup of Indian Market
Source: UC Analysis, CIER Report, ISI Securities, CMIE
462011 Universal Consulting India Pvt Ltd© Confidential
By 2020 almost 40% of the global Auto industry sales will be in Asia
Emerging markets like India and China will be the engines of auto industry growth in next 15 years
The mass markets of India and China will drive a trend towards smaller cars in developing countries
Production of components will shift to emerging markets too, although the location of capital-intensive final assembly plants will not change dramatically
Source: Economic Intelligence Unit
Automotive Sales by Region
Region 1999 2010 2020
Nafta 18,619,400 19,140,000 22,000,000
South and Central America 2,179,405 4,549,000 7,500,000
Western Europe 16,881,397 18,071,500 18,000,000
Eastern Europe 2,501,904 4,815,471 8,000,000
Asia 11,653,000 22,189,000 38,000,000
Rest of the world 2,558,322 4,029,800 6,500,000
Total 54,393,428 72,794,771 100,000,000
472011 Universal Consulting India Pvt Ltd© Confidential
India Auto component sector is expected to be USD 40 billion by 2015
Exports of auto` components from India have grown at a compounded growth rate of 19% over
the past six years
Along with expanding their in-house production, a number of Indian companies are moving
towards creating a niche in the world market as well
Auto Component Sector (USD bn)
3.3 3.9 4.7 5.7 7.312.0
15.0
0.6 0.6 0.81.0
1.4
8.0
25.0
2000 2001 2002 2003 2004 2010 2015
Domestic Exports
Indian Auto Component Sector (USD billion) Acquisitions by Indian Auto Companies
Source: Business World; www.securities.com; Economic Intelligence Unit
Buyer TargetDeal Value
(USD Mn)
Tata Technologies Incat Internationals, UK 95
Amtek Group GWK, UK 37
Amtek Group Zelter (70%), Germany 36
UCAL Fuel Systems Amtec Precision, US 28
Bharat Forge Federal Forge, US 9.1
Sona Koyo SteeringFuji Autotech (21%),
France6.15
Tata Autocomp SystemsWundsch Weidinger,
Germany5
Sundram Fasteners Cramlington, UK 2.6
482011 Universal Consulting India Pvt Ltd© Confidential
India can gain 3-4% share of USD 700 billion Auto Component outsourcing market
India has an advantage over other LCCs
India’s overall shareof the addressablemarket will be 3-4%or USD 20-25 billion
Global Market addressable by India
20.02
10.08
3.08
182
168
308
42
0.21
Engineering skillintensive
Labour intensive
Evolving tech. Parts& aggregates
Plastic/siliconintensive
Segment size
Addressable by India
Source: www.securities.com
492011 Universal Consulting India Pvt Ltd© Confidential
Rise in Telecom and internet growth will require investment of USD 20 billion over next 5 years
Growth in telecom subscriber base will fuel demand for telecom infrastructure
Investment opportunity of $22 billion across many areas:
- Telecom Devices and Software. Set Top boxes, Gateway exchange, Modem, Mobile handsets and
consumer premise equipments, Gaming devices, EPABX, Telecom Software
- Telecom Services for voice and data via a range of technologies
Telecom Growth in India (Mn Subscribers)
41 43 44 46 57 63 70 7713 33 51 74 81127
200
500
2002 2003 2004 2005 2006 2007 2008 2010
Fixed Line Wireless
Telecom growth in India (Million Subscribers) Internet growth in India (Million Subscribers)
Source: B&K Report; www.blonnet.com
0 06
18
40
0 0
2
9
20
2003 2004 2005 2007 2010
Broadband Subscribers
Internet Subscribers
502011 Universal Consulting India Pvt Ltd© Confidential
Media & Entertainment sector is expected to grow at a CAGR of 19% over the next 5 years
The Entertainment and Media Industry presents significant avenues for growth for foreign players. A host of
factors are contributing to this growth:
Expanding economy with increased job creation and rising disposable income
Increasing households with high spending power
Access to untapped rural potential through technological changes
Enabling government initiatives
Entertainment & Media Sector (USD million)
Segments 2004 2005 2006F 2007F 2008F 2009F 2010F CAGR
Television 2860 3289 3778 4511 5556 7267 9489 24%
Filmed entertainment 1256 1511 1756 2156 2511 2933 3400 18%
Radio 53 67 82 122 178 222 267 32%
Music 149 156 160 160 162 164 164 1%
Live entertainment 156 178 209 244 289 356 400 18%
Print media 2173 2422 2689 3000 3400 3844 4333 12%
Out-of-home 189 200 233 267 300 344 389 14%
Internet advertising 13 22 33 56 84 122 167 50%
Entertainment & media industry 6849 7844 8940 10516 12480 15253 18609 19%
Source: Business World
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IT-ITeS industry is expected to grow to USD 75 billion by 2008-09
Total addressable market for global offshoring is approximately USD 300 billion, of which USD 110 billion will be offshored by 2010
India has the potential to capture more than 50% of this opportunity and generate export revenues of approximately USD 60 billion by growing at 25% year-on-year till 2010
IT-BPO industry would employ nearly 2.3 million people & provide indirect employment to 6.5 million workers by 2010
Offshore Location Attractiveness IndexGrowth in IT Industry (USD billion)
Source: Nasscom; India: The Emerging Scenario
IT Industry (USD Billion)
0
21.628.4
36.3
75
2003 2004 2005 2006 2008
5.42
5.44
5.45
5.46
5.58
5.59
5.61
7.12
Canada
Brazil
Phillippines
Singapore
Czech Republic
Malaysia
China
India
522011 Universal Consulting India Pvt Ltd© Confidential
Real Estate market is expected to go from USD 12 billion to USD 50 billion in the next 5 years
Low housing finance rates and high growth in
industries like IT and retail have pushed the
demand for houses and commercial spaces
USD 4 billion of realty fund investment is
waiting to enter Indian realty market, with
USD 1 billion already having received
clearance
Foreign investors get far higher returns in
India than in most developed markets.
Whereas, they expect 5-6% developer returns
in the US, they get 20% or more from the
Indian housing market
Demand in 7 major cities
Source: Outlook Business
Market
Current Market Size
Project Market Size in next 5 years
Demand over next 5 years (Mn Sqr. Feet) 2005 2006-10
Commercial 24.3 125
Hospitality 8 78
Residential 100 800
Retail 9 50
Total 141.3 1053
Developer Margin
Residential
Commercial 25-45%
Demand for houses and commercial spaces in India is reaching to never-
before levels
USD 12bn
USD 50bn
30-100%
532011 Universal Consulting India Pvt Ltd© Confidential
Investments in Infrastructure
2
3
4 Special Economic Zones
1
Roads
Airports
Sea Ports
542011 Universal Consulting India Pvt Ltd© Confidential
Airport Infrastructure Investment will be USD 8-10 billion by 2010
The process of development of airports through PPP in the country began with CIAL (Cochin International Airport)
Of 35 non metro airports being taken up for modernization PPP has been approved for the city side development of 10 airports
Particular AirportsInvestment
(USD billion)
Restructuring/ Modernization for world class airports Delhi, Mumbai, Chennai & Kolkatta 4.5
Green Field AirportsBangalore, Hyderabad, Goa, Pune, Navi Mumbai, Nagpur (Hub)
and Greater Noida 2.25
Up gradation 25 selected airports 1.5
Modernization/ Improvement 55 airports 0.67
Dev. Of airports in (excluding Green Field Airports North East Region 0.1
Total Investment by 2010 9.00
Source: Committee on Infrastructure
552011 Universal Consulting India Pvt Ltd© Confidential
Four big projects have already been awarded
100% FDI is permitted for existing airports; FIPB approval required for FDI beyond 74%
100% FDI under automatic route is permitted for Greenfield airports
100% tax exemption for airport projects for a period of 10 years
Source: Outlook Business; Committee on Infrastructure
Project DevelopersInvestment (USD
Mn)Completion Date
Delhi International AirportGMR, Fraport, Malaysia Airport
& IDFC622 Phase 1 by 2010
Mumbai International
AirportGVK-South African Airports 533 Phase 1 by 2010
Bangalore International
Airport
L&T, Unique Zurich Airport &
Siemens Project Ventures314 2008
Hyderabad International
Airport
GRM & Malaysia Airport
Holding Berhad311 2008
562011 Universal Consulting India Pvt Ltd© Confidential
Ports Infrastructure development requires USD 5.8 billion in the next 5 years
India’s total seaborne traffic (in volume
terms) will double in the next 7 years
- Container traffic will play a major role by
increasing almost 4 times from current
levels to 2012-14
Also, the increase in seaborne traffic will
require substantial investment in port
infrastructure
Under NMDP, USD 3.5 billion will be
invested over next 5 years for the
construction of berths and jetties, and
USD 2.3 billion will be invested to improve
the inland water trade
Traffic at Indian Ports (Million Tonnes)
Source: www.blonnet.com, Outlook Business Report, India Ports Association
Traffic at Indian Ports (Mn Tonnes)
962
455
418
385
367
315
289
282
255
2013-14
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
572011 Universal Consulting India Pvt Ltd© Confidential
Road construction requires a USD 90 billion investment over next 6 years
Huge investment to improve current road infrastructure has become imperative to support the high growth in economy
Government has initiated 7 phase National Highway Development Program (NHDP) with an investment of over USD 58 billion till 2012
Private participation in road construction projects tend to increase
Many international players have entered road construction through joint ventures
Investment in Road Infrastructure (USD billion)
Source: Outlook Business
Investment in Road Sector (USD billion)
43
1713
97
National
Highways
State Highways PM Gramin
Sadak Yojana
Maintainence Expressways
582011 Universal Consulting India Pvt Ltd© Confidential
SEZ exports rise 52% in 2006-07
Exports from Special Economic Zones (SEZs) grew 52.31 per cent in 2006-07 to $7.7 billion from $5.1 billion in the previous year
The growth rate was more than double the 24.71 per cent increase recorded in the year 2004-2005
Exports from SEZs are likely to touch $15billion in 2007-08
The total investments that would be made in the 234 SEZs for which formal approval has already been given has been estimated at $66.67 billion
Source: Hindu Businessline April 2007
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Agenda
Geography & History
Economic Outlook
Foreign Trade
Market Opportunities
India’s Edge
602011 Universal Consulting India Pvt Ltd© Confidential
India ranks 43rd in the Global Competitive Index in 2006
World Economic Forum-Global Competitiveness Index (2006-2007)
*Figure in red indicates drop in ranking comparatively
Ranking on Index India China
Institutions 34 25
Infrastructure 62 37
Macroeconomy 88 7
Health and primary education 93 57
Higher education and Training 49 77
Market Efficiency 21 56
Technological Readiness 55 75
Business Sophistication 25 65
Innovation 26 46
Source: World Economic Forum
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India vs. China, structure of GDP
India’s structure of GDP is 53% in services in 2005 whereas China has only 40% share of GDP in services
Structure of GDP (%)
India
37%31%
19%
26%27%
28%
37% 42%53%
1981 1991 2005
India
Agriculture Industry Services
China
31%24%
12%
47%
42%
48%
22%34%
40%
1981 1991 2005
China
Agriculture Industry Services
Source: Economic Intelligence Unit
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India has developed a strong institutional and regulatory environment
Institutional Efficiency
Source: World Bank
47.3
53.950.7
58.82
76.47 75.49
39.9
7.3
40.638.24
40.20
3.92
Control of
Corruption
Voice and
Accountability
Rule of Law Property Rights Judicial
Independence
Freedom of Press
India China
632011 Universal Consulting India Pvt Ltd© Confidential
Indian Banks are in a strong position to support stable economic growth
The composite capital adequacy ratio of state-owned commercial banks in China was a mere 4.6% (2003), much lower than Basel requirement of 8%
In the mid-1990s, the RBI allowed the private sector to open new banks, increasing the level of competition
Indian banks are stronger than China in risk assessment systems, NPLs, capital base and central bank supervision
Financial Health of Banking
Source: Business Week
3.3 2.8
12.5
26
8.71
27
4.6
15
NPAs (% of Total Assets) NPL (% of GDP) Capital Adequacy
Ratio
Market share of Pvt.
Banks in Loans
India China
642011 Universal Consulting India Pvt Ltd© Confidential
The Indian private equity market shot up over 230% in 2006
According to Centre for Asia Private Equity Research data, India has seen $3.7 billion in PE investments during January-June, 2007 whereas Japan, drew PE funds worth $4.91 billion and China was $2.6 billion in the same period
Private equity fund investment in 2006 was $7.46 billion, up from $2.26 billion a year earlier, according to industry tracking firm Venture Intelligence
Private equity investments in India is expected to increase to USD 25 billion in the next 5 years This figure could even go up to USD 35 billion if the process of privatization was speeded up
De
al Siz
e (
USD
Millio
n)
0
Early Stage
5
20
100
Growth Capital
Buyouts
Stage
Types of Deals in India
Source: Business Today ; www.blonnet.com, Indian Express, April – 2007; Economic Times Jul 07;
652011 Universal Consulting India Pvt Ltd© Confidential
PE Funds in India
*An illustrative list
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Indian stock exchanges rank among the top 5 stock exchanges by trade volume
India has been regularly strengthening the regulatory and institutional framework of its capital markets since 1991
Abolition of controller of capital issues allowed free market pricing for IPOs in India. Compared to India, in Chinese market free float is just 30%
Source: Economic Survey of India 2006 -2007
Exchange Ranks 2003 2004 2005 2006
NASDAQ 1 1 2 1
NYSE 2 2 1 2
NSE 3 3 3 3
Shanghai 4 4 6 4
Korea 7 6 4 5
BSE 5 5 5 6
Shenzhen 8 8 7 7
Taiwan 6 7 8 8
London 10 10 10 9
Deutsche Borse 9 9 9 10
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India’s competitiveness is reflected in its corporate performance
Indian companies perform better as they face greater market pressure, and accountability
Indian is a well functioning market economy, where firms raise capital from market, leading businesses to focus
more on performance
Compared to India, in China, high FDI inflow keeps the cost of capital low and is fuelling excess capacity
ROE (in %) ROI (in %)
Corporate Performance of Indian & Chinese Business (2003)
Source: Business Week
20.6
17.2
21.4
29.127.3 26.6
17.4
8.1
17.6
9.8
6.5
10.6
Auto Capital Goods Energy Pharma Software and
Services
Food &
Beverage
14.2
12.4
15.3
23.9
25.9
23.6
12.8
6.3
13.9
8.2
6.4
8.8
Auto Capital Goods Energy Pharma Software and
Services
Food &
Beverage
Indian Firms Chinese Firms
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What sets Indian CEOs apart from their counterparts?
Indian CEOs voraciously seek out new
information, technology, and ideas to
adapt to India’s unique needs and
opportunities
At the same time, they spend less time
than their peers in other countries on
organizational politics and individual,
personal issues
The best Indian CEOs display high levels
of integrity and inner strength
Indian CEOs tend to keep business
relationships more formal and
professional than their Western peers
Indian CEOs
Single minded focus on growth & innovation
Highly altruistic business philosophy
Professional approach to people and relationships
High degree of resilience and integrity
Source: Hay Group
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India’s younger workforce and growing population will contribute to its future development
70 percent of India’s citizens are less than 36 yrs old and 20 percent of the world’s population under the age of 24 are Indians
India’s youth will rise to 942 million in 2025 and 1060 million in 2050
However by 2020, USA will be short of 17 million people of working age, China 10 million, Japan 9 million, and Russia 6 million
Thus, India will have a surplus of 47million working age people
2005 2025
Source: US Census Bureau
-60,000 -40,000 -20,000 0 20,000 40,000 60,000
0- 4
5- 9
10- 14
15- 19
20- 24
25- 29
30- 34
35- 39
40- 44
45- 49
50- 54
55- 59
60- 64
65- 69
70- 74
75- 79
80+
Age
-60,000 -40,000 -20,000 0 20,000 40,000 60,000
0- 4
5- 9
10- 14
15- 19
20- 24
25- 29
30- 34
35- 39
40- 44
45- 49
50- 54
55- 59
60- 64
65- 69
70- 74
75- 79
80+
Age
702011 Universal Consulting India Pvt Ltd© Confidential
Indian consumers play a larger role in fueling their nation’s economy than peers in export-driven China
GDP Forecast: China GDP Forecast: India
Net Export
10%
Consumption
40%
Investment
50%
Net Export
5%
Investment
32%
Consumption
63%
Note: All data are forecasts from 2007Source: Federal Reserve Bank, IMF and Private Economists
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India will be adding 140 million workers to global labor pool in next 15 years
India’s pool of young university graduates (those with seven years or less of work experience) is estimated at 14 million – the largest of all 28 countries MGI has studied
Source: Economic Intelligence Unit, McKinsey Quarterly 2005
New Jobs in the World Economy (2005-20)
Region Jobs (in Millions)% of World Net
Increase
Developing Asia 315.5 67%
China 65 13.80%
India 142.4 30.20%
Latin America 45 9.50%
USA 12.5 2.60%
EU25 8.4 1.80%
Total 471.3 100%
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India accounts for 28% of total suitable talent available across all offshore destinations
Aggregate Suitable Graduate Talent Pool for Offshore IT/BPO ('000)
Source: www.manpower.co.in
Suitable Graduate Talent Pool ('000)
1773
31543668
40954388
4673 4915
6386
727
654
514
427
293285
242
1471
India China Russia Philippines Turkey Thailand Poland Brazil Others Total
732011 Universal Consulting India Pvt Ltd© Confidential
India scenarios to 2010
Services-led boom (sustained above 8.5% growth)
- Private sector leads a service sector boom which trickles down into manufacturing, government steps out of the way
Central forecast – Economy grows at around 7.5%
- Macroeconomic stability maintained, slow structural reform, dynamic service sector
- Infrastructure problems, red tape, fiscal crowding out remain a constraint
Capacity constraints and red-tape limit growth (below 6% growth)
- Infrastructure, labour constraints, electricity, corruption
- Oil crisis, BoP and fiscal crisis
Source: Economic Intelligence Unit
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Summary: India on one slide
Attractions
World’s largest democracy, growing rapidly
Macroeconomic stability
English speaking sophisticated growing middle class, young growing population
Outsourcing capital of the world
Advanced financial markets attracting large portfolio investment
Services export house
Problems
Appalling infrastructure, most chaotic market
Large unemployment/ poverty
Lowest per head income amongst BRICs
Red tape and bureaucracy in every sector
Low levels of foreign direct investment (owing to red tape etc)
Mass manufacturing has not performed well so far; the big unknown
Source: Economic Intelligence Unit
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What do global leaders say about India?
“India is a developed country as far as intellectual capital is concerned.”Jack
Welch, General Electric
JACK WELCH, GEJACK WELCH, GE
JOHN CHAMBERS, CISCOJOHN CHAMBERS, CISCO
BILL GATES, MICROSOFTBILL GATES, MICROSOFT
MICHAEL DELL, DELLMICHAEL DELL, DELL
“India is handling the most sophisticated projects in the world
…I am impressed with the quality of the work.” Bill Gates, Microsoft
“We are expanding our presence in India to take
advantage of the R&D talent available.”
John Chambers, CISCO
“India can be a major part of Dell’s operations and we are looking to
capitalize on India’s human capital.” Michael Dell,
Dell
762011 Universal Consulting India Pvt Ltd© Confidential
What do global leaders say about India?
“India has a well-developed banking system, vibrant capital
markets and a new generation of indigenous world-class
companies.” Stephen Roach, MD, Morgan Stanley
“India has created world-class companies that can
compete with the best in the west, often on the cutting edge
of software, pharmaceuticals and biotechnology.”
Jonathan Power in International Herald Tribune, 7 May 2004
"Not only are there brilliant engineers here [in India], I’ve been seeing that the entrepreneurial spirit of the businesses is second to none."Mike S. Zafirovski, President and Chief Operating OfficerMotorola Inc.
772011 Universal Consulting India Pvt Ltd© Confidential
What do global leaders say about India?
"Toyota Motor has chosen to source from India due to its competitive cost of manufacture, availability of abundant engineering talent, and strong indigenous machine tool."Akio Toyoda, Senior Managing Director, Toyota Motors
"The economic dominance of the US is already over. What is emerging is a world economy. India is becoming a powerhouse very fast."Peter Drucker, Management Guru, Fortune Magazine
782011 Universal Consulting India Pvt Ltd© Confidential
An Important Note
We are not soliciting any action based on this material. This report is prepared for general circulation and is circulated for general information only. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individuals.
Whilst utmost care has been taken in production of this report, no liability can be accepted for any loss incurred in any way whatsoever by any person who may seek to rely on the report
Readers should seek advice regarding the appropriateness of strategies discussed or outlined in this report and should understand that statements regarding future prospects may not be realized
The information contained herein is obtained from sources we believe to be reliable, but its accuracy and completeness, and that of the opinions based thereon, are not guaranteed
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